It All Depends

By Peter DeHaan

Peter DeHaan, Publisher and Editor of Connections MagazinePeople often contact me looking for information about the outsourcing call center industry. Sometimes I am able to point them to content residing on the Connections Magazine website or one of our other related online resources. These queries are the easy ones.

Other times the inquiries relate to benchmarking and statistical issues for outsourcing call centers. These are harder to address. In doing my literature search for my thesis and dissertation, I found virtually no statistical data for outsource call centers. Although there is available information about call centers in general, the vast majority relate to in-house call centers and is generally not applicable to outsource call centers. All too often, the particular outsourcing call center metric sought does not exist in a published or statistically trustworthy form.

Sometimes I can answer these types of questions with empirical data or by experiential observation. However, even this can be misleading. Consider a frequent area of interest: ascertaining an acceptable agent occupancy rate. (Agent occupancy is the percentage of time that an available agent is processing calls or information.)  The answer is, “It all depends.” First, it depends on the form and function of the call center. Centers that handle multiple contact points, such as phone calls and email, should realize a higher occupancy rate; that is, non-time-critical activities (processing email) can be done at slow times or between time-critical activities (answering calls). Some centers can fill agent idle time with ancillary support activities, such as data-entry, transcription, and so forth. Again, occupancy rates increase.

However, the size of the call center is the main variable affecting both feasible and ideal occupancy rates. I have seen occupancy rates as low as the mid-twenties to as high as the mid-nineties and everywhere in between. In certain circumstances, any of these results could be the appropriate occupancy rate. Conversely, they could also be the wrong rate. The key reason for this hinges on the primary reason for call centers in the first place: economies of scale.

The smallest call center, or at least the smallest staffed call center, will have one person working per shift, 24/7. There will be times when this solitary agent is extremely busy (peak daytime traffic) and other times when virtually no calls are arriving (the middle of the night). As such, occupancy rates will vary greatly throughout the week, from quite low to moderately high.

Also, whether you blame it on Erlang or Murphy, there is a tendency for calls to bunch up. Here I share my recent experience at Connections Magazine. Most of my interaction with readers, authors, and vendors is done via email, so the phone does not ring too often. I continue to be surprised at going several hours without a phone call, only to have two arrive at once. I talk to the first caller, while the second goes to voicemail. In a call center, this second call would go into the queue and wait for the “next available agent.” In a one-person operation, that wait can be substantial. Even though the occupancy rate is still low, the service level has already begun to erode.

Taken further, the occupancy rate of a one-person call center can be forced higher by driving more calls to it without increasing staffing. As such, there will increasingly be callers in queue, hold times will mushroom, and the average answer time will skyrocket to unacceptable and insane levels. In short, the only way for a solitary agent to realize a high occupancy rate is to have calls continuously in queue.

Although “it all depends” on many other factors, small call centers can generally only achieve average occupancy rates in the mid-twenties to upper thirties percentage range. Attempting to push rates higher will result in call center suicide.

As call centers get larger, efficiencies increase and there are more agents available to more quickly handle the calls in queue. Therefore, traffic spikes are easier to deal with as there are more available agents taking the calls. The midsize call center can experience occupancy rates hovering around 50%, plus or minus.

Larger call centers, enjoying an even greater economy of scale, can respond better to traffic peaks and can therefore keep agents occupied a higher percentage of time while still maintaining an acceptable service level. Occupancy rates in the seventies become a realistic goal. Lastly, it is the very large call centers, with hundreds of agents working simultaneously that can experience call center nirvana. They can provide acceptable service levels even though their agents are chugging along at occupancy rates in the mid- to upper nineties.

All of this to indicate, that as far as the ideal occupancy rate, I can correctly say, “It all depends.” I’m not being caviler, flippant, or smart-alecky, merely factually honest.

Another common area of interest is determining an appropriate percentage of expenses spent on labor. Here too, “it all depends,” with call center size being the primary variable. Again, starting with the smallest of call centers – one agent per shift – there is a potential for overhead to be low and therefore labor costs will be high. This is because it is often the manager or owner who is taking calls. Administrative and support tasks can be effectively handled between calls and at slow times during the day (or night). As a result, all functions in the small call center can be highly integrated and efficient; this means low overhead. Therefore, the percent of expenses spent on labor can therefore be in the area of 50 to 70%.

When small call centers increase in size, a disproportional amount of effort and expense go to expanding corporate, management, and control structures. Supervisors need to be added, customer service staff become necessary, an accounting function is separately identified, and so on. As a result, a much higher percentage of expenses is allocated to non-agent areas and the percentage spent on labor correspondingly decreases. The mid-sized call centers can be the most inefficient with labor percentages dropping below 50%.

For larger call centers, the support and organizational structure is cost-efficiently expandable and scaleable to handle increased economies of scale. As a result, with the increased scope comes a decrease in the percentage of costs spent on nonoperational functions. This resultantly pushes the percent spent on labor back up. For the largest call centers, experiencing massive economies of scale and great efficiencies, labor percentages rise to the 70, 80, and even 90% mark. This is because of all other costs being spread over more and more agents. From a business standpoint, this is the most efficient and cost-effective call center scenario.

Given these two examples, one might conclude that larger call centers are ideal. After all, with increased size comes increased call occupancy rates and greater efficiency (that is, increased labor percentages and correspondingly decreased overhead percentages). There are, however, some downsides experienced in the larger call center: increased management and control issues, along with far greater complexity. So, in determining what the ideal call center size is, I can unequivocally state, that “it all depends.”

Peter DeHaan PhD is the publisher and editor-in-chief of Connections Magazine and a passionate wordsmith. Connect with him on his personal blogs, social media sites, and newsletter, all accessible from peterdehaan.com.

[From Connection Magazine November 2006]

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About Peter DeHaan

Wordsmith Peter DeHaan shares his passion for life and faith through words. Peter DeHaan’s website (http://peterdehaan.com) contains information and links to his blogs, newsletter, and social media pages.

Peter DeHaan is the president of Peter DeHaan Publishing, Inc., (http://peterdehaanpublishing.com) the publisher and editor of Connections Magazine and AnswerStat, and editor of Article Weekly.